Summary of Key Points from the Conference Call Industry Overview - The ongoing supply disruption in the Strait of Hormuz is affecting global oil supply, with approximately 20% of it impacted, leading to a shift in the 2026 oil outlook from oversupply to inventory drawdowns [1][6] - The medium-term outlook for oil prices is constructive, with a long-term Brent price forecast of US$75/bbl from 2028 onwards [1] Company-Specific Insights APAC Upstream Companies - Buy-rated APAC upstream companies (PTTEP, CNOOC, PetroChina, and STO) are currently pricing in an average Brent oil price of approximately US$65/bbl, which is considered low compared to developed market (DM) peers [1][12][14] - Valuations of these companies remain discounted relative to DM peers, presenting potential for catch-up [1][14] Price Target Adjustments - Target prices (TPs) for PTTEP have been raised to Bt165 from Bt155, reflecting higher oil prices and a valuation base year adjustment to a blended 2027/28 [2][26] - CNOOC's TP is set at HK$31.0, based on a 50%/50% blend of DCF and EV/DACF valuation [31] - PetroChina's TP is HK$11.50/Rmb15.30, with expectations of robust cash flow covering capex and dividends at less than US$50/bbl Brent [37] Financial Performance and Projections - PTTEP's EBITDA for 2026E is revised up by 6.1% due to higher Dubai price forecasts [26] - CNOOC is expected to see production growth of around 5% and a leading cash flow position, benefiting from elevated oil prices [31] - PetroChina's cash flow is projected to yield 10% in 2027E, with a dividend yield of 5% [37] Market Dynamics - The commodity team at Goldman Sachs sees upside risks to oil prices due to longer disruption scenarios, with potential prices temporarily exceeding US$100/bbl during high uncertainty periods [6][11] - Elevated JKM prices are expected to create favorable conditions for PetroChina to achieve higher domestic gas prices, with each 1% change in realized gas price impacting EBITDA by approximately 1% [7][23] Risk Assessment - ONGC is rated as a Sell due to elevated valuations compared to historical averages, despite a TP increase to Rs240 from Rs220 [2][46] - The market's perception of risk around the length of disruption could influence demand destruction urgency, potentially leading to higher prices [22] Conclusion - The APAC upstream oil sector presents an attractive risk-reward profile amid ongoing geopolitical disruptions, with several companies positioned to benefit from rising oil prices and favorable market conditions [1][6][12]

Summary of Natural Gas Comment: Higher TTF on Longer Supply Disruption and Higher Fuel Switching Costs Industry Overview - The report focuses on the **natural gas industry**, specifically the impact of ongoing disruptions to **Qatari LNG exports**, which account for **20% of global LNG supply** [5][18]. Key Points and Arguments 1. **Qatari LNG Export Disruption**: - The Qatari Energy Minister indicated that the disruption to LNG exports may last longer than previously expected, requiring a complete cessation of hostilities for operations to restart, followed by a ramp-up period of weeks to months [5][18]. - Qatari exports are now expected to remain at zero through late March, with a gradual ramp-up through most of April, leading to average annualized deliveries of **18 mtpa** in March and **43 mtpa** in April, compared to earlier expectations of **74 mtpa** and **76 mtpa** respectively [5][18]. 2. **Price Forecast Adjustments**: - The disruption has led to an increase in the **2Q26 TTF price forecast** to **63 EUR/MWh** or **$22/mmBtu**, up from **45 EUR/MWh** [5][19]. - The **2Q26 JKM price forecast** has also been raised to **$23/mmBtu**, from **$16/mmBtu** [5][19]. - For 2027, the forecasts are marginally higher, with **23 EUR/MWh** for TTF (up from **21 EUR**) and **$8.30/mmBtu** for JKM (up from **$7.55/mmBtu**) [5][19]. 3. **Impact on European LNG Imports**: - The LNG supply shock is expected to lower March/April NW European LNG imports to **207 mcm/d** and **195 mcm/d**, down from **302 mcm/d** and **262 mcm/d** respectively [8][18]. - The report estimates that every two weeks of full Qatari LNG supply disruption without offsets would tighten NW European inventories by almost **4%** of storage capacity [8][9]. 4. **Fuel Switching Dynamics**: - Higher natural gas prices are likely to increase the probability of fuel switching from gas to hard coal and oil products, with potential offsets of **19 mcm/d** for coal and **12 mcm/d** for oil [18][19]. - The current gas-to-oil switching range is set between **55 EUR/MWh** and **80 EUR/MWh**, which is higher than previously expected [16][19]. 5. **Market Risks**: - Risks to the revised price forecast are two-sided; a longer-than-expected closure of the Hormuz Strait could push TTF prices towards **100 EUR/MWh**, while a quicker resolution could lead to a drop back to the coal switching range in the **40 EURs/MWh** [5][19]. 6. **US Natural Gas Prices**: - US natural gas prices are expected to remain insulated from the spike in European gas and global LNG prices due to the US being a net exporter of LNG with no spare capacity at export terminals [19]. 7. **Long-term Supply Outlook**: - The expected start date for Qatar's North Field East (NFE) train 1 has been shifted to **January 2027** from **October 2026**, lowering global LNG supply by **2.8 mtpa** on average for 2027-2030 [19]. Additional Important Information - The report emphasizes that investors should consider this analysis as one of many factors in their investment decisions [4]. - The ongoing geopolitical situation and its impact on energy supply and prices are critical considerations for market participants [5][19].

Summary of Natural Gas Comment: TTF Forecast on Qatar LNG Disruption Industry Overview - The report focuses on the natural gas industry, specifically the impact of disruptions in Qatar's LNG production on global LNG supply and pricing dynamics. Key Points Qatar LNG Production Disruption - Qatar's LNG production was announced to be shut down, reducing near-term global LNG supply by 19%, equivalent to 302 million cubic meters per day (mcm/d) or 11 billion cubic feet per day (Bcf/d) [1][6] - Initial reports indicate limited damage to the facility, suggesting the shutdown may be precautionary and temporary, with expectations for resolution by the end of March [1][6] Price Forecast Adjustments - TTF prices rallied 37% to 43 EUR/MWh ($14.73/mmBtu) following the disruption announcement [1] - The forecast for April 2026 TTF has been raised to 55 EUR/MWh ($19/mmBtu) from a previous estimate of 36 EUR/MWh, which is above the current forwards at 43 EUR/MWh [1][12] - The average forecast for 2Q26 TTF is now 45 EUR/MWh, up from 36 EUR/MWh [1][12] Gas-to-Coal and Gas-to-Oil Switching - The gas-to-coal (G2C) switching model indicates that maximizing G2C switching for four months could offset the tightening in NW Europe due to the Qatar supply shock [1][7] - TTF prices are expected to rise into the gas-to-oil (G2O) switching range of 45-71 EUR/MWh to help manage gas storage levels in NW Europe [1][12] - Historical data shows a peak of 24 mcm/d of industrial demand switching to oil products during the 2022 energy crisis, indicating potential for significant switching behavior [1][12] Regional Impacts - Most of Qatar's LNG production was directed towards Asia, leading to expectations of a rally in spot LNG prices in the region (JKM) to attract additional cargoes from the Atlantic basin [1][6] - NW European LNG imports are anticipated to decrease, with NW Europe typically absorbing 50% of the total impact on European LNG imports [1][6] Inventory and Long-term Forecasts - The estimated inventory track is expected to normalize by the end of 1H26, leading to marginally lower forecasts for TTF and JKM in 2H26-1H27 due to lower carbon price assumptions [1][12] - Long-term global gas price forecasts remain unchanged despite the current disruptions [1][12] Risks and Uncertainties - There are two-sided risks to the revised TTF forecast, with potential upside due to uncertainties surrounding the restoration of Qatari LNG production and the reliability of the Strait of Hormuz flows [1][12] - A prolonged disruption of Qatari LNG volumes could lead TTF prices to exceed 100 EUR/MWh ($34/mmBtu), triggering significant global gas demand destruction [1][12] Additional Insights - The report highlights the importance of monitoring global LNG balances and regional demand dynamics, particularly in light of geopolitical events affecting supply chains [1][12] - The analysis emphasizes the need for flexibility in energy sourcing strategies as market conditions evolve due to supply shocks [1][12]